The Economic Consequences of War with Iraq

War with Iraq seems inevitable, with or without the support of the UN. The economic costs of such a war could be huge, both in direct American outlays for war and its aftermath, and in the indirect spillovers on the world economy. This war would take place against a background of weak economic conditions globally, and would exacerbate those weaknesses, perhaps throwing the world economy into recession. The economic outcome of war could well depend on the diplomatic context. If America acts alone, the likely costs of war to the world economy will be higher than if it has the backing of the UN.

The costs of war must be balanced against the costs of alternative actions. A high cost of war is certainly not a case for inaction, especially in the face of a serious risk that Iraq could obtain, and eventually use, weapons of mass destruction. Yet pursuing war where diplomatic means - weapons inspections, threats of retaliation in the face of Iraqi aggression, readiness of the UN to act if dangers from Iraq become imminent - might suffice could result in huge and avoidable economic (as well as other) costs.

The traditional textbook view of war is that war stimulates an economy, at least in the short term. But that simple view of wartime economics is too narrow to describe the possible effects of an Iraqi war. We must also recognize that a war with Iraq, even a limited war, could profoundly disrupt the international flow of goods, services, and investments upon which our global economy now rests.

To continue reading, please log in or enter your email address.

Registration is quick and easy and requires only your email address. If you already have an account with us, please log in. Or subscribe now for unlimited access.

required

Log in

http://prosyn.org/pYC3oUg;
  1. Chris J Ratcliffe/Getty Images

    The Brexit Surrender

    European Union leaders meeting in Brussels have given the go-ahead to talks with Britain on post-Brexit trade relations. But, as European Council President Donald Tusk has said, the most difficult challenge – forging a workable deal that secures broad political support on both sides – still lies ahead.

  2. The Great US Tax Debate

    ROBERT J. BARRO vs. JASON FURMAN & LAWRENCE H. SUMMERS on the impact of the GOP tax  overhaul.


    • Congressional Republicans are finalizing a tax-reform package that will reshape the business environment by lowering the corporate-tax rate and overhauling deductions. 

    • But will the plan's far-reaching changes provide the boost to investment and growth that its backers promise?


    ROBERT J. BARRO | How US Corporate Tax Reform Will Boost Growth

    JASON FURMAN & LAWRENCE H. SUMMERS | Robert Barro's Tax Reform Advocacy: A Response

  3. Murdoch's Last Stand?

    Rupert Murdoch’s sale of 21st Century Fox’s entertainment assets to Disney for $66 billion may mark the end of the media mogul’s career, which will long be remembered for its corrosive effect on democratic discourse on both sides of the Atlantic. 

    From enabling the rise of Donald Trump to hacking the telephone of a murdered British schoolgirl, Murdoch’s media empire has staked its success on stoking populist rage.

  4. Bank of England Leon Neal/Getty Images

    The Dangerous Delusion of Price Stability

    Since the hyperinflation of the 1970s, which central banks were right to combat by whatever means necessary, maintaining positive but low inflation has become a monetary-policy obsession. But, because the world economy has changed dramatically since then, central bankers have started to miss the monetary-policy forest for the trees.

  5. Harvard’s Jeffrey Frankel Measures the GOP’s Tax Plan

    Jeffrey Frankel, a professor at Harvard University’s Kennedy School of Government and a former member of President Bill Clinton’s Council of Economic Advisers, outlines the five criteria he uses to judge the efficacy of tax reform efforts. And in his view, the US Republicans’ most recent offering fails miserably.

  6. A box containing viles of human embryonic Stem Cell cultures Sandy Huffaker/Getty Images

    The Holy Grail of Genetic Engineering

    CRISPR-Cas – a gene-editing technique that is far more precise and efficient than any that has come before it – is poised to change the world. But ensuring that those changes are positive – helping to fight tumors and mosquito-borne illnesses, for example – will require scientists to apply the utmost caution.

  7. The Year Ahead 2018

    The world’s leading thinkers and policymakers examine what’s come apart in the past year, and anticipate what will define the year ahead.

    Order now